Are we ready for the next meltdown?

Are we ready for the next meltdown?

By Allan Sloan, senior editor-at-large   @FortuneMagazine August 30, 2013: 1:30 PM ET

Okay, folks. It’s been five years since Lehman Brothers failed, setting off a chain of unanticipated consequences that came within inches of melting down the world’s financial system. Had the Federal Reserve, other central banks, and the U.S. government not intervened and thrown trillions of dollars at the crisis to keep financial markets afloat, we would be talking about Great Depression II.

But rather than offering the conventional wisdom about what’s happened since Lehman filed for bankruptcy on Sept. 15, 2008, which is readily accessible in a zillion places, I’d like to offer some unconventional wisdom — at least I hope it’s wisdom — based on my 40-plus years of writing about business. My specialty is fiascoes and failures, which is why there’s a toy vulture hanging from my office ceiling, a mid-1980s Father’s Day present from my children. Read more of this post

Asia Services Set to Exceed Manufacturing as GDP Share

Asia Services Set to Exceed Manufacturing as GDP Share

Dinh Tu quit being a monk three years ago and worked in a yoga studio in Ho Chi Minh City to cater to a growing Vietnamese middle class who are finding new outlets for their money. These days, he’s selling insurance, too. “People in Vietnam have more to spend now,” said the 40-year-old agent for Tokyo-based Dai-ichi Life Insurance Co. “Because I’m no longer a monk, I have to worry about financial pressures, too. I can see that insurance is a good business.” As Tu and millions of other Asians switch from traditional occupations, farms and factories, the contribution of service industries to the region’s emerging economies is poised to exceed 50 percent for the first time, according to data compiled by Bloomberg from government statistics. The watershed marks Asia’s shift from its role as the world’s workshop with countries led by China concentrating on building domestic economies. Read more of this post

The prospect of the Pratt family taking part of their Visy packaging empire public has always tantalised the business community

James Thomson Editor

A very private family goes public: Pratt family’s investment guru Alex Waislitz to run listed group

Published 04 September 2013 11:04, Updated 04 September 2013 13:59

The prospect of the Pratt family taking part of their Visy empire public has always tantalised the business community, particularly the nation’s investment bankers. A few years ago, we got close when packaging group Pact, owned by Richard Pratt ’s daughter Fiona and her husband Raphael Germinder, looked at an IPO. But on Tuesday, it finally happened. Well, sort of. Alex Waislitz is set to become the non-executive chairman of listed cashbox Wentworth Holdings after his investment group Thorney struck a deal on a $50 million recapitalisation of the company. The business will be renamed Thorney Opportunities Ltd. The deal means Waislitz will manage the money of ordinary punters for the first time. Read more of this post

The Greek Yogurt Culture War; It’s Crowding Out Classic Flavors and Others in the Dairy Case; Bye Bye, Margarine

September 3, 2013, 7:22 p.m. ET

The Greek Yogurt Culture War

It’s Crowding Out Classic Flavors and Others in the Dairy Case; Bye Bye, Margarine

SARAH NASSAUER

Culture wars are being waged at a supermarket near you, as traditional yogurt is getting the squeeze from upstart Greek-style brands. WSJ’s Sarah Nassauer joins Lunch Break. Photo: F. Martin Ramin for The Wall Street Journal. These are dark days for fans of regular yogurt. The creamy snack is being edged out on grocery store shelves by its thicker, tarter, higher-protein sibling, Greek yogurt. Over a third of the yogurt in a typical grocery store is now Greek, in varieties from low-fat to fruit-on-the-bottom to tubes for kids. Because shelf space is limited, the Greek squeeze means consumers have had to say goodbye to some varieties of traditional-style yogurt and more obscure flavors. (R.I.P. Stonyfield Farm’s Whole Milk White Chocolate Raspberry and Strawberry Acai flavors.) Pudding cups, margarine and other products with the misfortune of usually sitting near yogurt also are harder to find. Read more of this post

Texas Wines Take the Heat in $1.8 Billion Business; With 275 bonded wineries producing 3 billion gallons annually and $1.8 billion in sales, both climate and sales marketing have made it a struggle to compete with California, Oregon

Texas Wines Take the Heat in $1.8 Billion Business

Being the fifth largest wine grape and wine producing state in the U.S. might be worth boasting about, but Texas is not a state that takes fifth place lightly. With 275 bonded wineries producing 3 billion gallons annually and $1.8 billion in sales, Texas’s wine industry is still expanding. But both climate and sales marketing have made it a struggle to compete with California, Oregon, and other states for bragging rights. “Our state’s top vignerons are among the bravest, most intrepid and most tortured farmers on the planet,” Houston Chronicle wine columnist Dale Robertson wrote last month. “Late freezes, hailstorms and drought wreak constant havoc.” Read more of this post

Procter & Gamble is talking to retailers about plans for a new bargain version of its flagship Tide laundry detergent. Three years ago P&G scrapped a lower-priced Tide Basic, fearing cannibalization

Updated September 3, 2013, 7:12 p.m. ET

P&G to Test Waters Again on a Bargain Tide

Cheaper Liquid Detergents Are Growing; Company Scrapped Earlier Effort

PAUL ZIOBRO

Procter & Gamble Co. PG -0.18% is trying again with a lower-priced Tide. In a move that could set off price battles in the laundry aisle, Procter & Gamble is talking to retailers about plans for a new bargain version of its flagship Tide laundry detergent, people in the industry said. One person said the product may be a liquid detergent called Tide Simple, a name P&G considered when it tried a low-price Tide several years ago. It would be priced just above rival bargain brands, such as Church & Dwight Co.’s CHD -0.30% Arm & Hammer. P&G declined to comment. A decision to offer a lower-priced version of the premium brand carries the risk that buyers of regular Tide could trade down and stay there. Read more of this post

Dollar General Is Paying Its Way; Shareholders Should Be Concerned About Its Dwindling Edge Over Larger-Format Competitors

September 3, 2013, 5:45 p.m. ET

Dollar General Is Paying Its Way

Shareholders Should Be Concerned About Its Dwindling Edge Over Larger-Format Competitors

SPENCER JAKAB

For retailers who obsess about a few cents here or there, there is nothing more painful than seeing an item walk out the door at a margin of negative-100%. Discussing a tepid fiscal first quarter, management at Dollar General Corp.DG -0.17% cited such “shrinkage” as a factor behind weaker margins. A euphemism for loss of inventory, mainly due to theft, it is a cost of doing business for a retailer found largely in low-income neighborhoods.  Read more of this post

Why Are Items Pricier in China? From iPads to Starbucks to ice cream and cars, the price of many goods is far higher in China than in many other countries. But consumers there are wising up

September 3, 2013, 7:43 p.m. ET

In China, Veil Begins to Lift on High Consumer Prices

Resistance to Prices Grows Amid New Ways to Comparison Shop

LAURIE BURKITT

BEIJING—In China, consumers pay nearly $1 more for a latte at StarbucksSBUX +1.53% than their U.S. counterparts. A Cadillac Escalade Hybrid Base 6.0 costs $229,000 in China, compared to just over $73,000 in the U.S. Welcome to China’s modern retail world, where the price of many goods is far higher than in many other countries, a disparity that is all the more stark considering the income differences. A basic iPad 2 is priced at $488 in China, where average per capita income is around $7,500. The same tablet is $399 in the U.S., where average per capita personal income totals $42,693. Clothing and other apparel is on average 70% more expensive for consumers in China than in the U.S., according to data from SmithStreet, which compared the prices of 500 items of 50 brands in both countries. Read more of this post

When a Beijinger Owns 1,000 License Plate Numbers to rent out for profit; Flawed public policy can only be avoided through transparent decision-making and the use of judicial review

09.03.2013 12:40

When a Beijinger Owns 1,000 License Plate Numbers

Flawed public policy can only be avoided through transparent decision-making and the use of judicial review

By Wang Yong

Beijinger Wang Xiuxia should be in the Guinness World Records book for holding 1,000 license plate numbers, equivalent to 5 percent of new Beijing numbers issued monthly. She rented them out for profit. The case, exposed in late August, involves a number of legal and public policy questions worth analyzing. Wang’s rental business had two models of operation. Before a purchase limit was enacted by the Beijing city government in 2011, she rented identity cards to people from outside Beijing so they could register license plates. After the purchase limit came into effect – a limit that requires locals to enter a lottery system to get a plate – she rented out plates under her own name. Read more of this post

State Council Counselor Xia Bin noted that results of the ongoing nationwide auditing of local government debt could be quite “striking”, with substantial part of debts having gone sour, proposes “bailout” package to deal with the problems

State Council Counselor Suggest Tough Ways Against Local Debt

09-04 15:33 Caijing

Xia Bin says Beijing should punish those who spends recklessly and lavishly on offical buildings.

A counselor of the State Council in China suggested tough ways in reining in local government’s addition to debt, including sales of government’s assets like the usually fancy office buildings. “Local governments who spend recklessly and extravagantly in office building, while shouldering high debt burden, should be ordered to move out from their luxurious offices….and sell them along with other good assets to repay debts,” Xia Bin, who is also honorary director of the Finance Institute of the State Council Development Research Center, told media on Tuesday. Read more of this post

New Chinese Luxury: Pairing Wine With Duck, Not Sprite

New Chinese Luxury: Pairing Wine With Duck, Not Sprite

By Bloomberg News – Sep 3, 2013

Can’t tell a Monet from a Van Gogh? Christie’s International’s China staff can help. Mixing a pricey Chateau Petrus or Chardonnay with Sprite? Sommeliers at Shanghai wine retailer Sarment will explain why not. As growth in China’s luxury industry slows and consumers turn more selective, high-end brands are boosting efforts to educate consumers on the finer points of haute couture and vintage wines to persuade them to pay up. Read more of this post

Don’t Trust a Chicken Nugget That’s Visited China; Would you willingly eat a chicken nuggets processed in a country that has no intention of meeting U.S. food-safety standards? Most Americans likely wouldn’t

Don’t Trust a Chicken Nugget That’s Visited China

Would you willingly eat a chicken nuggets processed in a country that has no intention of meeting U.S. food-safety standards? Most Americans likely wouldn’t.

That may explain why the U.S. Department of Agriculture waited until Friday — the day before a long holiday weekend — to announce that it had ended a ban on Chinese chicken imports by approving four Chinese poultry processors to ship processed (“heat-treated/cooked”) chicken to the U.S. The report on the approved poultry plants noted that the audit set out to “to determine whether the People’s Republic of China’s (PRC) food safety system governing poultry processing remains equivalent to that of the United States (U.S.), with the ability to produce products that are safe, wholesome, unadulterated, and properly labeled.” Needless to say, the Chinese plants passed. Read more of this post

Chinese local governments need cash so badly they’re beating, kidnapping and killing to get it

Chinese local governments need cash so badly they’re beating, kidnapping and killing to get it

By Gwynn Guilford @sinoceros 11 hours ago

Chinese local governments have taken on scary levels of debt—12.1 trillion yuan ($1.9 trillion), by some estimates. That’s scary for the central government, which will be on the hook to bail out any Chinese Detroits. But it’s scary for residents, too. Take, for example, Hong Xiaorou, a four-year-old girl bulldozed to death in Fujian province on August 29. Or Xu Haifeng, whose family members have been kidnapped on 18 separate occasions, as Reuters reports. Read more of this post

China PMI may not signal rising commodity demand: Clyde Russell

China PMI may not signal rising commodity demand: Clyde Russell

Tue, Sep 3 2013

(The author is a Reuters columnist. The opinions expressed are his own.)

By Clyde Russell

LAUNCESTON, Australia, Sept 3 (Reuters) – Commodity producers and traders have no doubt been cheered by the recent recovery in China’s key manufacturing sector, but the boost may be more to sentiment than actual demand. This is because there is a fairly weak correlation between movements in China’s official Purchasing Managers’ Index (PMI) and imports of key commodities such as crude oil, iron ore and copper. Read more of this post

China has a choice – short-term growth or sustainability; The elimination of a subsidy that encourages feckless borrowing is overdue

September 2, 2013 4:23 pm

China has a choice – short-term growth or sustainability

By Michael Pettis

The elimination of a subsidy that encourages feckless borrowing is overdue, says Michael Pettis

Years of artificially low interest rates have been key both to China’s rapid growth and to its notorious domestic imbalances. The role of financial repression – manipulating the financial system to divert money from savers to producers – in the Chinese growth model is widely recognised. But the improvement in the country’s interest rate structure is not. As a rule when nominal lending rates are broadly in line with nominal gross domestic product growth rates, the rewards of expansion are efficiently distributed between savers and users of capital. When they are substantially lower, however, as they have been in China for the past 30 years, net lenders – mainly household depositors – in effect pay a hidden subsidy to net borrowers. In China these include state entities, manufacturers, state-owned enterprises and real estate developers. Read more of this post